17 January 1995 GST/HST Interpretation 12000-1 - Calculation of the Goods and Services Tax (GST) on Reservations for Passenger Transportation Services Sold by a Non-resident Agent on Behalf of Canadian Suppliers

Dear XXXXX ,

Thank you for your facsimile transmission of February 23, 1994, wherein you requested information on the calculation of the Goods and Services Tax (GST) on reservations for passenger transportation services sold by a non-resident agent on behalf of Canadian suppliers. I apologize for the delay in responding to your letter.

I understand that XXXXX is a non-resident agent who sells passenger transportation in the XXXXX for Canadian suppliers. XXXXX normally collects GST on the total value of the reservation which they pass on to the Canadian supplier. However, one of the Canadian suppliers is requesting that XXXXX deduct its' commission prior to calculating the GST to the reservation. You request assistance in determining the correct application of the GST.

Several attempts have been made, but without success, to contact you in order that more information may be obtained with respect to the supply of the transportation service. Therefore, I am unable to provide a ruling on the specific fact situation outlined in your facsimile. However, I will provide some general comments.

Generally, a supplier may enter into an agency agreement whereby the agent agrees to sell passenger transportation services on behalf of the supplier. The agent is paid a commission for the service provided to the supplier. The commission may be paid directly to the agent by the supplier, or the agent may deduct an amount as commission from the amount received for the transportation service before forwarding the remainder to the supplier. This payment arrangement does not impact on the GST status of the goods and services supplied.

When a (GST registrant makes a taxable supply of a passenger transportation service, the registrant is required to collect GST on the total value of the amount payable for that supply. In essence, if the passenger transportation service is taxable at 7%, the registrant must collect 7% on the total value payable as consideration for that supply. The supplier may not reduce the GST charged, where the amount payable for the supply has not been reduced. In other words, the supplier may not subtract the agent's commission in order to determine the amount of GST payable on the passenger transportation service.

For example, a travel agent who sells a ticket on behalf of a registered GST supplier will collect the amount payable (ticket price) plus the total amount of GST applicable. Assuming the ticket price is $1,000, the agent collects on behalf of the registrant, an amount of $1,070 (includes GST of $70). Since the provision of a passenger transportation service is a separate supply from that of the travel agent's service, the GST charged on the passenger transportation service may not be reduced by deducting the agent's commission. In other words, on a ticket price of $1,000 the GST collected will be $70.

The foregoing comments represent our general views with respect to the subject matter of your letter. Unannounced proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in GST Memorandum 100-3, do not bind the Department with respect to a particular situation.

Yours truly,

J.A. Venne
Director
Tax Policy - Special Sectors
GST Policy & Legislation